Tariffs and alliance of countries

The immense power of the United States has brought it glory, but now it has brought disrepute and alienation from its allies. Many announced tariffs have not been implemented, others have been modified through bilateral negotiations with the affected countries after they were announced, and still others have been extended, such as the 30% tariff on imports from Mexico and the European Union. Donald Trump uses a transactional approach to governing.

The United States only represents 15% of global trade. If governments representing 85% join forces to impose their own tariffs on the US, Trump will have to reverse even more of what he has done.

The impact of tariffs on capital markets is immediate. When they are announced, stock prices fall, and vice versa, when corrections are made, prices rise. They also have repercussions on exchange rates.

Faced with Trump's marginalization of trade multilateralism, countries are now seeking to strengthen their bilateral relations with the US to avoid punitive tariffs. It's a pragmatic response. Countries are also seeking alternatives with other trading partners. India and Brazil, for example, have formed an alliance to challenge Trump's tariffs. This demonstrates that influential economic relations are the result of interaction.

The US government's position on the application of tariffs is that this will finance public spending, in addition to reducing the welfare state. However, there are some gray areas in this context. One is the inflationary effect on the domestic economy, and another is that countries that currently have a trade surplus with the United States will reduce their exports to that country and shift them to other markets.

Trade policy is becoming an instrument of geopolitical struggle, which excludes cooperation as the cornerstone of trade relations.

China's position of power is becoming more established, and it has been advancing in the global economy based on its productive organization. Some of its characteristics are the following:

1. The annual number of university graduates has increased from one million in 2000 to 12 million today. Of these, half have degrees in science, technology, engineering, and mathematics. China has five times more graduates in these fields than the United States.

2.- Currently there are six million Chinese in foreign universities.

3.- Chinese companies are partnering with foreign firms, which has led to technological modernization. They have also expanded their supply chains and expanded their network of suppliers and innovators.

4.- China has become industrially decentralized, causing its 31 provinces to compete.

5.- China's manufacturing success is its enormous scale of production that lowers costs, its greatest competitive advantage.

On balance, the United States, in addition to its trade unilateralism, also engages in military intervention. This demonstrates that multilateral institutions are becoming irrelevant when the drums of war are beating, drowning out attempts at peace.